Transport demand is growing rapidly, reflecting growing populations and wealth, urbanisation, and a rapidly changing globalised world. Investing in transport infrastructure can therefore be a fundamental driver of long-run growth.

As stretched public finances provide limited opportunities for public investments, it is critical for governments from advanced, emerging and developing countries to engage the private sector now to scale-up investment in transport infrastructure.

Shifting financing towards sustainable transport infrastructure

At the same time, addressing climate change and other pressing challenges will require a significant shift of financing towards sustainable transport infrastructure, to avoid locking-in emissions-intensive and climate-damaging development pathways.

The transport sector is the second-largest source of greenhouse gas emissions globally, contributing 23% of carbon dioxide emissions from fossil-fuel combustion. It also is a significant source of fine particulate matter, nitrogen oxides and ozone, which pose serious risks to human health. The recent OECD Environmental Outlook to 2050 projects that premature deaths from exposure to particulate air pollutants will double from current levels to 3.6 million per year in 2050. Over this period, transport-related greenhouse gas emissions – which are driven mainly by the growing demand for cars in emerging economies -- are expected to double unless additional policies are put in place.

We therefore face the opportunity - and the urgency - to move private investment towards building right, not just building more. By scaling-up and shifting investment towards more sustainable transport modes we can reduce local air pollution and traffic congestion and achieve significant environmental, human health, social and economic benefits.

Governments have a central role in helping to mobilise private investment in sustainable transport infrastructure. Helping governments to facilitate private investment and support the transition towards green growth is therefore a priority for the OECD.

Our new report provides governments with a comprehensive toolkit of enabling policies and instruments to mobilise private investment in sustainable transport infrastructure. It reviews good practice across developed and developing countries, with a focus on land-based passenger transport such as passenger rail, metros, bus rapid transit systems and electric vehicle charging infrastructure. This paper builds on the five-point Green Investment Policy Framework developed by the OECD, and emphasises the need for integrated, sound domestic policy frameworks to address investment barriers.

Key policy recommendations

Allow me to briefly highlight some key policy recommendations from the report:

First, adopt a “co-benefits” approach. GHG reductions may have less prominence than reduced traffic congestion and local air pollution in driving policy support for sustainable transport. But climate change goals nevertheless benefit from measures against congestion and pollution. The Bus Rapid Transit system “Metrobús” in Mexico City, for example, was designed primarily to reduce local air pollution and traffic congestion, but it generated several co-benefits. In addition to cutting travel time for users by 40%, and reducing passenger exposure to particulate matter by about 50%, Metrobús saved 110,000 tons of greenhouse gas emissions annually. This is equivalent to annual emissions from 20,790 passenger vehicles.

Second, establish pricing instruments to shift incentives away from fossil-fuel based road transport. These incentives include carbon prices, fuel and vehicle taxes, reform of fossil-fuel subsidies and congestion charges. Congestion charges have been successfully implemented in Singapore, Stockholm and London, as well as a number of other cities. For instance, Stockholm’s congestion charging system decreased car use by 25%, congestion by 14% and local GHG emissions by 2.7%, and increased public transit use by 60,000 passengers per day. It helps to complement pricing instruments with regulations and standards such as fuel economy standards, zoning policies and public procurement.

Third, use innovative financial tools and risk-sharing mechanisms to mobilize new sources of financing. Land value capture tools, for example, aim to harness revenues from the increase in property value generated by new or renovated transport infrastructure, and are particularly promising to help fund new projects. They were used to finance the extension of several metros, as for the Copenhagen Metro (2008) in Ørestad, a new development area. Using a highly innovative approach, the metro line extension was entirely financed through developer land sales, user fares and tax revenues from assignment and urban valorization. Other useful instruments include public-private partnerships, provided that they are carefully designed, as well as green bonds. Setting suitable financing vehicles is particularly critical to attract institutional investors such as pension funds.

Although the core elements of good practice highlighted in this report are likely to be similar for all countries, there is no one-size-fits-all combination, and policy tools need to be tailored to specific country contexts and packaged into a coherent policy mix.

Ladies and Gentlemen,

To date this new OECD report provides one of the most comprehensive toolkits of policies and instruments to help governments facilitate private investment in sustainable transport infrastructure. The report and the brochure summarizing key messages are both available in this room.

But this report is just a first step. We will continue working with governments and the private sector to identify policy frameworks that better support private investments in green infrastructure. Our next projects will look at financing sustainable transport in China and mobilising investment in sustainable infrastructure in France. Only in this way, by applying our general toolkit to the specific circumstances and needs of a country, can we fulfill our mission: to develop better policies for better lives.